Ward v. Nationwide Mutual Automobile Insurance

*242ELDRIDGE, Judge.

This case involves claims under an automobile insurance policy for personal injury protection (PIP) benefits. Both Maryland and the District of Columbia have statutory provisions relating to claims for PIP benefits under automobile insurance policies, and the issues before us concern which statutes are applicable, as well as the meaning of the applicable statutory provisions.

The action arose out of an automobile accident which occurred on March 19, 1988, in Adelphi, Maryland. The six plaintiffs, who are Jeanne 0. Ward, Jessica M. Ward, Danielle Ward, Dawn Ward, Wanda Miles, and Olivia C. Miles, were traveling in an automobile on University Boulevard in Adelphi when their vehicle was struck in the rear by an automobile driven by the defendant Muthuvel Chelliah. The four Ward plaintiffs and the defendant Chelliah are residents of Maryland. The two Miles plaintiffs are residents of the District of Columbia.

The automobile in which the plaintiffs were traveling was owned by Lillie and Russell Miles, who are the parents of the plaintiff Wanda Miles and the grandparents of the plaintiff Olivia C. Miles. Lillie and Russell Miles are also residents of the District of Columbia, residing in the same household as Wanda and Olivia Miles. The Miles automobile was registered in the District of Columbia. It was covered by an automobile insurance policy which was executed and delivered in the District of Columbia by the defendant Nationwide Mutual Automobile Insurance Company. Lillie and Russell Miles were the named insureds in the policy.

The six plaintiffs on April 27, 1988, each submitted a complete application for PIP benefits on Nationwide’s forms. In a letter accompanying these applications, the plaintiffs asserted their rights to “PIP benefits available under the policy of insurance and paid for by the insured,” and also informed Nationwide that they intended to assert *243third party liability claims against Muthuvel Chelliah.1 Nationwide denied the applications for PIP benefits on the theory that, under District of Columbia law, the plaintiffs must elect either to receive PIP benefits or to maintain a third party liability claim, but that the plaintiffs could not elect both.

The plaintiffs later commenced the present action by filing a complaint in the Circuit Court for Prince George’s County, naming both Muthuvel Chelliah and Nationwide as defendants. In the first six counts of the complaint, the plaintiffs sought damages from Chelliah, alleging that his negligent driving caused the accident which resulted in injuries to each of the six plaintiffs. In counts seven through twelve, the plaintiffs sought damages from Nationwide based on Nationwide’s refusal to pay PIP benefits in accordance with the insurance policy issued on the Miles automobile.

Nationwide moved for summary judgment. In its motion, Nationwide argued that the insurance contract was issued in the District of Columbia on an automobile which was registered in the District of Columbia, and that, therefore, District of Columbia law should apply under the principle of lex loci contractus. Furthermore, Nationwide argued that the applicable District of Columbia law requires an injured person to make an election between PIP coverage and a third party liability claim. According to Nationwide, the plaintiffs were not eligible for PIP benefits because, at the time of their application for the benefits, the plaintiffs *244advised Nationwide of their intent to pursue a third party liability claim.

In response to Nationwide’s motion for summary judgment, the plaintiffs argued that, because the accident occurred in Maryland, the law of Maryland should control under the principle of lex loci delicti.2 The plaintiffs alternatively argued that, as long as they applied for PIP benefits within the sixty day time period provided by District of Columbia law, “an insured is entitled to personal injury protection coverage, regardless of any liability claim that may arise out of the accident.”

At the conclusion of a hearing, the circuit court granted Nationwide’s motion for summary judgment with respect to counts seven through twelve. Thereafter the case proceeded to trial on counts one through six. Subsequently, money judgments were entered in favor of the plaintiffs and against the defendant Chelliah.

The plaintiffs noted an appeal, challenging only the summary judgment in favor of Nationwide. Before argument in the Court of Special Appeals, this Court issued a writ of certiorari.

As previously stated, the insurance policy at issue in this case was executed in the District of Columbia on a vehicle registered in the District of Columbia. The insurance policy provided for “Personal Injury Protection options in accordance with the District of Columbia Compulsory No-Fault Motor Vehicle Insurance Act. . . .” The basic provision of that statute relating to PIP benefits is District of Columbia *245Code Ann. (1981, 1988 Repl. Vol.), § 35-2104, which provides in relevant part as follows:

“Personal injury protection.
“(a) In general. — (1) In addition to insurance required to be provided by an insurer under § 35-2106, each insurer shall offer to each person required to have insurance under this chapter optional personal injury protection insurance as set forth in this section. Personal injury protection shall provide coverage for victims for injuries arising from accidents resulting from the operation or use of a motor vehicle by the insured or use of the insured motor vehicle within or outside the District. It shall provide benefits for medical and rehabilitation expenses, work loss, and funeral benefits as set forth in this section. Personal injury protection benefits are applicable only to a victim who is an insured or an occupant of the insured’s vehicle or of a vehicle which the insured is driving.
******
“(b) Payment without regard to fault. — The benefits set forth in this section with respect to personal injury protection shall be provided without regard to, and irrespective of, negligence, freedom from negligence, fault, or freedom from fault on the part of any person.”

Lillie and Russell Miles, in their insurance policy with Nationwide, chose to purchase the optional PIP coverage provided for by § 35-2104. With respect to the automobile involved in the accident, they carried PIP coverage in the amount of $100,000.00 for medical expenses, $24,000 for work losses and $4,000 for funeral expenses. A premium was charged for each. The PIP endorsement to the insurance policy expressly covered persons other than the named insureds while those persons were occupying the insured vehicle. Furthermore, § 35-2104 of the D.C.Code, quoted above, provides that the PIP coverage is applicable to occupants of the insured vehicle.

*246Actions by insureds or persons covered under insurance policies, against their insurers, for benefits under so-called first party coverages such as PIP or uninsured motorist, are contract actions and are generally controlled by principles applicable to contract actions. Thus in Reese v. State Farm Mut. Auto. Ins., 285 Md. 548, 552-553, 403 A.2d 1229, 1231-1232 (1979), we stated:

“Under the statutorily required coverage, the defendant has directly promised to pay the insured plaintiff under certain conditions. Because it is a promise by the insurer to pay its own insured, rather than a promise to its insured to pay some third party, the uninsured motorist coverage is in insurance parlance ‘first party coverage’ like collision, comprehensive, medical payments or personal injury protection, and not ‘third party coverage’ such as personal injury or property damage liability insurance. A suit based upon the insured’s allegations that he is entitled to payment under one of the first party coverage clauses in the contract he entered into with his insurance carrier, and that the carrier has refused payment thereby breaching its promise, is clearly a contract action____ [It is] governed by the principles and procedures applicable to contract actions generally.”

See Lane v. Nationwide Mut. Ins. Co., 321 Md. 165, 169-170, 582 A.2d 501, 503 (1990); Nationwide Mutual Ins. v. Webb, 291 Md. 721, 735-736, 436 A.2d 465, 473-474 (1981). See also Insurance Com’r v. Prop. & Cas. Corp., 313 Md. 518, 529-532, 546 A.2d 458, 463-465 (1988). Therefore, the claims against Nationwide for PIP benefits, set forth in counts seven through twelve of the plaintiffs’ complaint, are contract claims. They are governed by the principles applicable to contract claims, including contract choice of law principles. Cf. Volkswagen of America v. Young, 272 Md. 201, 220, 321 A.2d 737, 747 (1974) (a personal injury action based on breach of warranty is a contract action and thus is governed by contract choice of law principles).

As recently discussed in Allstate Insurance Company v. Hart, 327 Md. 526, 611 A.2d 100 (1992), in deciding *247questions of interpretation and enforceability of contract provisions, a Maryland court ordinarily should apply the law of the jurisdiction where the contract was made. This choice of law principle is referred to as lex loci contractus. See, e.g., Kramer v. Bally’s Park Place, 311 Md. 387, 390, 535 A.2d 466, 467 (1988); Bethlehem Steel v. G. C. Zarnas & Co., 304 Md. 183, 188, 498 A.2d 605, 607 (1985); Traylor v. Grafton, 273 Md. 649, 660, 332 A.2d 651, 659 (1975).

The rule of lex loci contractus is subject to a limited exception where a contractual provision or the foreign law is contrary to a very strong Maryland public policy. Nevertheless, for the reasons set forth in Allstate Insurance Company v. Hart, supra, 327 Md. at 532-33, 611 A.2d at 103, this narrow public policy exception has no application to the PIP coverage under the insurance policy in the present case and to the District of Columbia statute regulating contractual PIP benefits.

Consequently, because the Nationwide insurance policy was executed and delivered in the District of Columbia, on an automobile owned by District residents and registered in the District, the law of the District of Columbia governing PIP coverage and PIP benefits is the controlling law in this case. The Maryland statutory provisions regulating PIP coverage and benefits,3 which apply to automobile insurance policies issued, sold, or delivered in Maryland, or to motor vehicles required to be registered in Maryland, have no application in this case.

Although Nationwide correctly argues that the plaintiffs’ PIP claims are controlled by the language of the PIP endorsement to the insurance policy and by the District of Columbia law regulating PIP coverage, Nationwide’s assertions concerning the applicable District of Columbia law are *248totally unsupported.4 Nationwide in this case has consistently taken the position that, if the plaintiffs intended to or chose to pursue third party liability tort claims, they are not entitled to PIP benefits. This position finds no support in either the language of the insurance policy or the provisions of the District of Columbia Code regulating PIP benefits.

The provisions of the Nationwide insurance policy relating to PIP coverage are contained in an endorsement entitled “Endorsement 1895A. Personal Injury Protection Coverage (District of Columbia).” The language of the endorsement does not, either expressly or by any possible inference, provide that if a covered person pursues a third party liability claim, that person is not entitled to PIP benefits. The endorsement contains a list of fourteen “Coverage Exclusions,” but none of them relates to the election or pursuit of a third party liability claim. The endorsement also contains a section entitled “Coordination and Non-Duplication,” which deals with the relationships between the PIP coverage and workers’ compensation or temporary nonoccupational disability benefits required by law, and between the PIP coverage and PIP benefits under another policy. The section does not mention liability claims or liability insurance.

Finally, the language of the insurance policy on the Miles automobile directly contradicts Nationwide’s theory. In a section entitled “Our Right To Recover Payment,” the policy states as follows:

“1. If we make a payment under this coverage and the person to or for whom payment was made has a right to recover damages from another, we shall be subrogated to that right. That person shall do:
(a) whatever is necessary to enable us to exercise our rights, and
*249(b) nothing after loss to prejudice them.
2. If we make a payment under this coverage and the person to or for whom payment is made recovers damages from another, that person shall:
(a) hold in trust for us the proceeds of the recovery; and
(b) reimburse us to the extent of our payment.”

These subrogation and reimbursement provisions clearly contemplate the payment by Nationwide of PIP benefits which are later reimbursed after a successful tort action against a negligent third party. Nationwide’s contention, that covered persons cannot receive PIP benefits under the policy if they intend to pursue a third party liability claim, is flatly inconsistent with this portion of Nationwide’s policy.

The sections of the District of Columbia Code regulating contractual PIP coverage similarly provide no support for Nationwide’s position. As earlier set forth, the principal statutory provision requiring an insurer to offer PIP coverage, and delineating the scope of that coverage, is § 35-2104 of the District of Columbia Code. Sections 35-2105(a), (d), (e), (f), (g) and (h), 35-2106(a) and (g), 35-2107, 35-2110, and 35-2111 also relate to PIP coverage and benefits. Under these provisions, the basic conditions for receipt of PIP benefits are that an insured purchase the optional PIP coverage with respect to his motor vehicle, that a covered person suffer a personal injury resulting from the operation or use of the insured motor vehicle within or outside the District, that such person incur medical expenses or work loss or other covered expenses set forth in the statute, that the victim “notify the personal injury protection insurer within 60 days of an accident of the victim’s election to receive personal injury protection benefits” (§ 35-2105(a)), and that the victim not have received PIP benefits fully covering the loss under the PIP coverage of another policy. If these conditions are met, the language of § 35-2104(c), (d) and (e) mandates that PIP “benefits shall be paid” for the victim’s reasonable medical and rehabilitation expenses, for the victim’s work loss, and, in the event of death, for *250funeral expenses. Although §§ 35-2105(a) and 35-2105(g) provide that if a covered person fails to file a PIP claim within 60 days of the accident, the person ordinarily is limited to pursuing a third-party liability action, nothing in these or any other sections of the District of Columbia Code indicates that an insurer may deny a timely filed PIP claim because the claimant is pursuing a third party tort action. The plaintiffs in this case did notify Nationwide of their election to receive PIP benefits within 60 days of the accident.

In arguing that the plaintiffs are not entitled to PIP benefits because they chose “to pursue both a claim for PIP benefits and [to seek] damages against the third party driver,” Nationwide relies upon § 35-2105(b) of the District of Columbia Code. (Nationwide’s brief, p. 7). This provision, entitled “Lawsuit restriction ...,” in its entirety states as follows:

“(b) A victim who elects to receive personal injury protection benefits may maintain a civil action based on liability of another person only if:
(1) The injury directly results in substantial permanent scarring or disfigurement, substantial and medically demonstrable permanent impairment which has significantly affected the ability of the victim to perform his or her professional activities or usual and customary daily activities, or a medically demonstrable impairment that prevents the victim from performing all or substantially all of the material acts and duties that constitute his or her usual and customary daily activities for more than 180 continuous days; or
(2) The medical and rehabilitation expenses of a victim or work loss of a victim exceeds the amount of personal injury protection benefits available.”

Section 35-2015(b) restricts tort lawsuits by a victim who elects to receive PIP benefits. The above-quoted language does not state that a covered person who has timely elected PIP benefits is not entitled to PIP benefits if that person also pursues a tort liability claim against the wrongdoer. *251Furthermore, no other provision of the District of Columbia Code which has been called to our attention, or of which we are aware, contains the converse of § 35-2105(b), namely that a victim who elects to pursue a third party tort liability claim is not entitled to receive benefits under a timely PIP application. In addition, no decision of the District of Columbia Court of Appeals supporting this view of the statute has been called to our attention.5

Moreover, Nationwide’s construction of § 35-2105(b) would seem to be inconsistent with the purpose of the District of Columbia’s no-fault motor vehicle insurance law. In light of the findings set forth in § 35-2101(a), it appears that the District of Columbia Council believed that the traditional tort liability remedy was inadequate and failed to protect victims of motor vehicle accidents.6 The Council *252provided for PIP coverage in lieu of tort lawsuits. As shown by the findings, the substantive provisions of the statute, and the cases, the legislative body intended to encourage contractual no-fault PIP claims and to restrict tort lawsuits.7 This is typical of numerous no-fault insurance plans throughout the country. Nationwide, however, would construe the statute to have the opposite result.

*253The “beneficiaries” of the District’s no-fault insurance plan are the victim and the negligent tortfeasor, who, if the victim elects to receive PIP benefits, is protected from a third party liability suit unless certain conditions are met. See Monroe v. Foreman, 540 A.2d 736, 741 (D.C.App.1988). The beneficiary is not the claimants’ PIP insurer who has collected premiums for PIP benefits and who is contractually obligated to pay a timely application for those benefits. Nationwide’s position turns no-fault insurance on its head.

Consequently, we reject Nationwide’s contention that § 35-2105(b) of the District of Columbia Code mandates a loss of a covered person’s PIP benefits if that person also attempts to pursue a liability claim against the third party tortfeasor. Cf. Chairman of the Board v. Waldron, 285 Md. 175, 401 A.2d 172 (1979) (rejecting an argument similar to that made here by Nationwide with regard to a Maryland statute providing retirement benefits). Section 35—2105(b) is simply a statute limiting tort actions. If the accident in this case had occurred in the District of Columbia, and if the defendant Chelliah had invoked § 35-2105(b), the statute may have provided a tort defense for Chelliah.8 It does not *254prevent the plaintiffs’ from collecting the contractually bargained for PIP benefits.

JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE’S COUNTY WITH REGARD TO COUNTS SEVEN THROUGH TWELVE OF THE COMPLAINT REVERSED, AND CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY NATIONWIDE MUTUAL AUTOMOBILE INSURANCE COMPANY.

. The dissent states that, despite the execution and filing of the applications for PIP benefits, the plaintiffs did not "elect" PIP benefits. The plaintiffs’ submission of their applications for PIP benefits clearly indicates their election to receive PIP benefits. The District of Columbia Code Ann. (1981, 1988 Repl.Vol.), § 35-2105(a), requires a victim to “notify” the insurer “within 60 days of an accident of the victim’s election to receive personal injury protection benefits.” The plaintiffs notified Nationwide of their intent to receive PIP benefits by submitting applications for them on the forms prescribed by Nationwide for this purpose.

. Judge Chasanow’s dissent states that the plaintiffs argued that they need not make an election between PIP benefits and a tort suit because they believed that Maryland "contract and insurance law was applicable." This is not our understanding of the plaintiffs’ position. The plaintiffs argued that Maryland tort law was applicable and not District of Columbia tort law embodied in D.C.Code § 35-2105. The accident occurred in Maryland. Under the principle of lex loci delicti, to which this Court has firmly adhered with regard to torts occurring in Maryland, the substantive tort law of Maryland applies and not the tort law of the District of Columbia.

. Maryland Code (1957, 1991 Repl.Vol., 1992 Cum.Supp.), Art. 48A, §§ 539, 540, 543, 544, and 545.

. Instead of this Court construing the applicable District of Columbia law, we would prefer to certify the question to the District of Columbia Court of Appeals. The District of Columbia, however, does not have a certification statute authorizing that Court to accept such a certified question.

. Judge Chasanow in dissent cites two cases and a commentator to support his view that a victim who elects to pursue a tort suit is not entitled to receive benefits under a timely PIP application. Neither the cases cited nor the commentator support this position.

In Dimond v. District of Columbia, 792 F.2d 179, 184 (D.C.Cir.1986), the United States Court of Appeals for the District of Columbia Circuit stated that "[o]nly victims who have elected to receive optional no-fault personal injury protection benefits will ever be statutorily barred from maintaining a tort action.” Similarly in Lee v. District of Columbia, 559 A.2d 308, 309 n. 1 (D.C.App.1989), the District of Columbia Court of Appeals stated that "an accident victim may elect to sue in tort rather than receive personal injury protection benefits.” Each court and the commentator simply paraphrased the District of Columbia’s statute barring certain tort lawsuits after an accident victim elected PIP benefits. Neither court remotely suggested that there is a bar against receiving PIP benefits because the victim instituted a tort suit. The tort suit may be forfeited when the victim applies for PIP benefits; PIP benefits are not forfeited when the victim files a lawsuit. For example, if a victim, injured in an accident occurring in the District of Columbia in a vehicle registered and insured in the District, files a third party liability suit the day after an accident and thereafter, within 60 days files a claim for PIP benefits, the District of Columbia’s substantive law of torts requires that the lawsuit be dismissed, not that PIP benefits be denied. None of the authorities relied upon in the dissent support a contrary conclusion.

. Section 35-2101(a) of the District of Columbia Code states as follows:

"(a) Findings. — The Council of the District of Columbia finds that:
*252(1) Motorists, motor vehicle passengers, and pedestrians in the District are not adequately protected, by current law and practice, from the consequences of motor vehicle accidents.
(2) If a person suffers personal injuries because of an accident involving a motor vehicle in the District, he or she is unlikely to recover the amount of his or her actual losses because:
(A) Approximately 50% of the victims do not satisfy the prerequisites to compensation under the present law;
(B) Approximately 40% of the operators in the District do not maintain any motor vehicle insurance or have other financial resources sufficient to pay losses;
(C) The average motor vehicle insurance policy in the District will pay only up to $10,000 for the personal injuries of any 1 victim, a sum that is insufficient to compensate adequately a victim with serious injuries; and
(D) Satisfaction of the prerequisites to compensation under the present law is time-consuming and expensive to policyholders because a victim must establish that the accident was the fault of another person; that the person injured was free from contributory fault; and that the injuries suffered were the natural and probable consequences of the accident.
(3) Far greater protection to victims of motor vehicle accidents is available at a lower price than that afforded for coverage currently available.
(4) The purchase of this better insurance protection should be compulsory because of the great potential of a motor vehicle to cause personal injury."

. See, e.g., Stackhouse v. Schneider, 559 A.2d 306, 307-308 (D.C.App. 1989) (§ 35-2105 represents “an effort to preclude suit in motor vehicle cases where an injury was not serious”); Coleman v. Cumis Ins. Soc., Inc., 558 A.2d 1169, 1171 (D.C.App.1989) (“In exchange for this certain, but limited, [PIP] compensation, the No-Fault Act eliminated most civil claims for damages based upon tort liability"); Monroe v. Foreman, 540 A.2d 736, 741 (D.C.App.1988) ("the Council enacted the No-Fault Act mandating compulsory insurance and restricting civil suits in order that motorists and victims, such as the parties herein, would be adequately protected by making recovery of out-of-pocket expenses readily available through an insurer”); Johnson v. Collins, 516 A.2d 196, 198 (D.C.App.1986).

. As previously noted, supra n. 2, when determining which jurisdiction’s tort law shall govern, a Maryland court ordinarily will apply the substantive tort law of the place where the tort occurred under the doctrine of lex loci delicti. Hauch v. Connor, 295 Md. 120, 123-125, 453 A.2d 1207, 1209-1212 (1983), and cases there cited. See Black v. Leatherwood, 92 Md.App. 27, 37-44, 606 A.2d 295, 299-303, cert. denied, 327 Md. 626, 612 A.2d 257 (1992) (Legislative cap on the amount of tort damages recoverable for noneconomic loss is part of the substantive law of tort damages and thus is subject to the principle of lex loci delicti; therefore, because the accident occurred in New Jersey, the Maryland statutory cap on recoverable tort damages is not applicable).

In Jacobs v. Adams, 66 Md.App. 779, 505 A.2d 930, cert. denied, 306 Md. 513, 510 A.2d 259 (1986), the Court of Special Appeals held that § 35-2105(b) should be regarded as part of the District of Columbia’s substantive tort law. As the accident in the present case occurred in Maryland, however, it would not appear that § 35-2105(b) of the District of Columbia Code would have benefited the defendant Chelliah even if he had invoked that statute. Under Maryland law, the receipt of PIP benefits does not affect the right to maintain a lawsuit *254against the tortfeasor. See Code (1957, 1991 Repl.Vol.), Art. 48A, § 542.

The dissent argues that D.C.Code § 35-2105 requires the plaintiffs to choose either PIP benefits or a tort suit, or forego the PIP benefits. Under the dissent’s view, a Maryland court would be required, because of foreign tort law, to bar a suit for PIP benefits which would be permitted under Maryland law. This view raises the question of whether Maryland, the state where the accident occurred and the forum state, would apply its own law instead of the foreign law. In Hauch v. Connor, supra, 295 Md. at 133, 453 A.2d at 1214, we stated:

"With regard to the threshold matter of whether the court is open to a particular litigant, obviously the policy of the forum state is extremely important. In this respect, the bar or absence thereof in a state's workmen’s compensation statute is somewhat analogous to the bar of a state’s statute of limitations. The latter matter, of course, is controlled by the law of the forum."

See also, Bishop v. Twiford, 317 Md. 170, 175-176, 562 A.2d 1238, 1241-1242 (1989). The dissent’s view of § 35-2105 of the D.C.Code would present significant choice of law issues in a case such as this.